The Obama administration talks of an Asian “pivot” and America’s “Pacific century,” but in terms of trade and investment, Europe remains hugely important for the United States. According to figures cited by Britain’s Minister for Europe, trans-Atlantic trade supports close to 15 million jobs, and U.S. investment in European Union member states was worth $2 trillion at the end the 2010. At the same time, investment by EU countries in the United States stood at $1.5 trillion.

In addition, Washington still looks largely across the Atlantic, and not to Asia (with the exception of Australia), for military support. When conflict appears on the world stage, Europe continues to be the main source of American allies, as the wars in Afghanistan and Iraq have demonstrated. Britain alone provides 10,000 combat troops for the International Security Assistance Force in Afghanistan, and key U.S. allies such as Poland have also made important contributions.

But despite the crucial role that European countries still play in terms of geostrategic interests for the United States, there is no denying the fact that Europe’s economic and military power is diminishing. The debt crisis sweeping through much of the eurozone is devastating many European economies, from Greece and Spain to Italy. Even Germany, the economic powerhouse of the European Union, is not immune. Its AAA credit rating from Moody's Investors Service could end up being downgraded because of German banks’ heavy exposure to Greek debt.

Concurrently, European investment in defense spending continues to fall. Now, just three out of 28 NATO member states meet the agreed minimum of spending 2 percent of gross domestic product on defense. NATO is already a two-tier alliance, with the United States and United Kingdom bearing the overwhelming burden in terms of war-fighting. The future of the world’s most successful multilateral alliance is also threatened by the rise of the European Union’s Common Security and Defense Policy, which is leading to the duplication of scarce military resources, and the development of a separate EU defense identity which significantly undercuts NATO.

For several decades, American administrations, to varying degrees, have backed the European Project, or the idea of “ever-closer” union in Europe, in the naive hope that this would lead to peace, prosperity and stability across the Atlantic. That approach today makes no sense at all for the United States. Events in Europe are moving at a tremendous pace, and U.S. policy should adapt with the times.

European decline is being driven by a combination of damaging big government policies — the rise of vast welfare states, a dangerous and undemocratic supranationalism, and a clearly demonstrated unwillingness to invest in defense. The European Project itself is falling apart, drowning in a sea of debt, and driven by bureaucrats in Brussels who lack any semblance of democratic accountability.

A Greek exit from the Euro now looks inevitable, and when Athens jumps ship, Madrid, Lisbon, Rome and others may follow. Five to 10 years from now, the European single currency might not even exist at all, and the European Union itself could look very different, with major countries such as Great Britain possibly opting to leave altogether in favor of membership in the European Free Trade Association.

It is foolhardy for Washington to back further European integration, which itself is increasingly unpopular with electorates across the EU. America’s approach toward Europe should be simple: support economic freedom, democratic accountability and national sovereignty. These are all things the American people cherish. What works at home also works abroad.

Europe needs liberty and limited government, advanced by nation states whose leaders are accountable to their own people. A free and prosperous Europe is in America’s interests. A supranational superstate suffocated by socialism, debt and overregulation certainly is not.

• Nile Gardiner is director of the Margaret Thatcher Center for Freedom at the Heritage Foundation